There is currently good reason to be particularly interested in commodity markets. The price of a barrel of oil is striding towards 20-year highs, and has fallen more than 30% since the war in Iraq began: aluminium prices have been poor because of anticipated expansion of Chinese production capacity and coffee and cocoa prices have made huge gains up from lifetime lows caused by global over-production. Alongside these supply-side factors, investors continue to be interested in commodities as an alternative to the traditional investor markets of equities and bonds, particularly with gold and oil returning to the headlines. This article analyses why treasurers are increasingly being made aware of their businesses’ exposure to commodity price movements and why they are turning to the financial markets to mitigate these risks.
